Commodity Shares Spur Asian Mkts; S&P/ASX Sets High

SINGAPORE (MarketWatch) -- Asian stock markets were buoyed again Tuesday - though failing to match Wall Street's gain - amid hopes for a rebound in the global manufacturing sector, with commodity shares leading the way. Shipping shares however faltered after their recent large rise.

Australia's S&P/ASX 200 was 1.5% higher at 3952.70 after hitting its best level for 2009, at 3964.30.

Japan's Nikkei 225 was up 0.9% with South Korea's Kospi Composite up 0.9%, Taiwan's main index up 1.3% and New Zealand's NZX-50 1.1% higher. China's Shanghai Composite was up 0.6%, though Hong Kong's Hang Seng Index slipped 0.2% after a three-day, 11.2% winning streak, and U.S. stock futures were mildly lower in screen trade.

David A. Rosenberg, Gluskin Sheff chief economist, said "the Asian revival may be for real. Unless the data are lying, we are seeing spreading strength across the continent. This is bullish for the commodity complex."

Risk appetite was still being felt in Asia, though some base metals and crude oil slipped after their recent spurt and some froth was coming off the euro and Australian dollar. Asian share markets were lagging Wall Street, with bourses already up in hefty fashion of late.

Overnight the Dow Jones Industrial Average jumped 2.6% after supportive data on U.S. manufacturing, construction spending and personal incomes, and as investors shrugged off the much-expected bankruptcy filing by General Motors.

Commodity plays were higher again, with BHP Billiton up 2.2%, Alumina up 5.7%, Rio Tinto up 5.6% and Oil Search up 2.6% in Sydney. Nippon Steel was up 3.8% and Mitsubishi Materials up 2.7% in Tokyo. In China, Zijin Mining Group had risen 5.9% and Western Mining tacked on 3.8%. Singapore's Olam, a commodities trader, gained 7.4%.

"The action in commodity markets continues to suggest the end is in sight for the global slowdown," said IG Index sales trading head Tim Hughes. "Stock investors seem happy to keep pushing mining shares higher - this is a sector that has outperformed the wider market for much of this year and at the moment it seems to have plenty of positive momentum behind it."

Those hoping for a turnaround in global demand were pointing to the still-surging Baltic Dry Index, which has risen 20 sessions in a row, adding a further 5.4% Monday. But shipping stocks slipped, with Nippon Yusen off 1.5% and Mitsui O.S.K. Lines off 1.7% in Japan.

Exporter stocks gained in Korea, even as the won rose, with LG Electronics up 3.4%. Hyundai Motor added 2.9% with Daewoo Motor Sales - which sells GM/Daewoo cars through a nationwide network in Korea - up 9.8% after GM's local unit said it would become part of the "new" GM.

ICBC was 2.5% lower, the worst-performing blue chip on the HSI, in reaction to Goldman Sachs' placement of ICBC H-shares to raise US$1.9 billion.

Singapore's Straits Times Index was up 0.7%, Malaysian shares 0.1% higher, Philippine shares up 1.1% and Indonesian shares up 0.7%.

"There are new signs of recovery (for the global economy) and a lot of liquidity; money is looking for places to go," said April Lee-Tan, research head at CitisecOnline.com in the Philippines.

Stronger share markets weren't translating to Japanese yen weakness in Asia, even though that currency tends to fall when risk appetite improves. The U.S. dollar was at Y96.32, from Y96.65 late in New York, with the euro at $1.4161, from an early high of $1.4180 and $1.4150 in New York, and at Y136.40, from Y136.67.

Dealers in Tokyo said Asian hedge funds and exporters were buying the yen amid a general trend for U.S. dollar weakness. The Australian dollar was at US$0.8084, from an overnight high of US$0.8152 and the New Zealand dollar at US$0.6463, from US$0.6519.

Some consolidation for the riskier currencies wouldn't surprise, said BNZ strategist Danica Hampton. "From a fundamental perspective, our analysis shows the New Zealand dollar as over-stretched - the rally has outpaced the increase in risk appetite, New Zealand commodity prices and the New Zealand/U.S. three-year swap."

Japanese government bonds were tracking U.S. Treasurys lower, with lead futures down 0.35 at 136.16, with the government to auction some 10-year bonds later Tuesday. The yield on the 10-year note rose to 1.515%, its highest level since November 14.

Spot gold was up $2.40 at $976 a troy ounce, after slipping in New York, though traders were mixed on whether it would make it over $1,000 in the near term.

LME three-month copper was down $10 from the London kerb, at $5,065 a metric ton. Still, Triland analysts said it was poised for further gains, with an initial target of $5,500.

Some sellers came into July Nymex crude oil futures, which were down 48 cents on Globex at $68.10 a barrel after rising $2.27 in New York.

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